Sunday, 22 February 2015

Reward: Attraction vs Retention

Reward definitely is one of the most fascinating HR topics
destined to top and firmly remain high on the business leaders’ agenda,
especially on that of financial institutions boards.

The growing interest in reward
management, however, is not purely scientific or rhetoric-based; employers are
habitually extremely pragmatic and what interest them the most is their
organization gaining competitive edge and being successful in the market they
compete in. Reward is presently regarded as an essential aspect of modern
management in that it is believed that appropriate reward management practices can
effectually help employers to attain their intended objectives and ultimately pursue
their intended strategies.

One of the main reasons, arguably the main reason, employers
are increasingly directing their attention to reward is associated with its
alleged motivating effect. Nonetheless, it can be hardly contended that the motivational
aspect may be considered as a distinctive reward feature. This subject has indeed
caused controversy over time and the findings of the numerous investigations
conducted over the years do not sustain this theory either.

Individuals are different one another; yet, individual
preference and wants are also highly likely to change with the passing of time.
The exogenous environment and the constant technological advances clearly play
a fundamental role in this sense as well as the national and global economic
and financial circumstances. A growing significant role is also played by the
demographic aspect by reason of the ageing population phenomenon.

Individual wants and expectations are indeed influenced by
several factors and can thus be considered as ever-changing and in many
respects as increasingly dynamic; notwithstanding, the value proposition
offered by employers must invariably aim at meeting as far as possible these
needs. To this extent it should be essentially adopted the same approach and
mechanism used in marketing according to which businesses should introduce in
the market the goods and services which consumers want to buy and not those
which the firm can more easily offer. Similarly, employers should offer their employees
not the reward packages they prefer to offer or are most comfortable to offer,
but rather the reward packages their employees would like and are thus expected
to receive.

Financial rewards are, by
common consent, considered more effective to attract talents and more in
general individuals from the external environment, rather than to motivate and
engage individuals. Nonetheless, it is also fairly widespread the conviction
that this magnetic effect is due to vanish into thin air fairly soon. This essentially
means that whether an employer needs to recruit individuals from the external
environment to fill some new or vacant roles, this can successfully have
recourse to financial reward as an appropriate leverage to attract and lure quality
people, safe in the knowledge that this will not be enough to retain these
hereinafter. To avert the occurrence of such a situation, HR and reward
specialists before recruiting a talented individual from the exogenous
environment, in addition to the identification of the most appropriate reward
package that should be offered to the most suitable candidate, should also develop
a clear plan of action enabling the organization to retain this.

Employers necessarily have to be far-sighted. These are indeed
aware that to attract skilled individuals they should offer these appealing financial
reward packages, which they are habitually willing to offer, but it also needs to
be clear from the outset the plan of action aiming at retaining these and
receiving their best contribution over time to the pursuance of the business
strategy.

This is clearly not an exclusive reward matter. Whether, for
instance, the person does not fit the organization’s culture or has
misunderstood the content of his/her role, there will not be reward package
worth to retain the individual. Under such circumstances, it would be better to
recognize the recruitment error, bear the waste of money associated with it and
with the induction process and start back seeking for the genuinely perfect match
for the company and the position.

The circumstance employers
should develop for high-flyers an appropriate reward package enabling them to
both attract and retain these, does not entail that reward specialists should
prepare for each of these individuals a precise progressive salary increase
plan. The effect of money would not in any case be long-lasting and, unless
there would not be the employer willingness to cover individuals with cash, which
sooner or later would prove to be in any case insufficient, the retention
objective has to be clearly pursued having recourse to other means. Inasmuch as
there is a wider consent amongst reward practitioners and academics upon the
effectiveness of financial reward to attract individuals from the exogenous
environment, there also is a rather widespread agreement on considering non-financial
rewards effective and, in any case, much more effective than financial rewards
to motivate and engage people. Engaged and motivated people are clearly more
likely to genuinely and spontaneously go the extra mile, exhibit discretionary
behaviour and contribute to organizational success.

Employers and reward professionals in order to retain
quality individuals should not therefore insist on the financial components of
reward, but should rather identify and develop appropriate and sound
non-financial, intrinsic forms of reward and recognition. Are indeed these components
of the overall reward package which influence in practice individual behaviour
and prompt employees to work with dedication. Non-financial rewards also
contribute to induce individuals to develop a feeling of involvement and participation
on the organizational success and to increase in turn their sense of
citizenship.

All in all, it clearly emerges that total reward approaches
are the most, or rather, the only suitable approaches employers and reward
managers can have recourse to in order to retain and keep employees motivated. Albeit
the role of money may become of secondary importance in order to motivate
people during the employment relationship, money will invariably continue to
talk. The importance of financial reward, by extension, needs to never be neglected
or overlooked by employers. Individuals will invariably associate with money a
relevant degree of importance and, even though they might not constantly think
about financial rewards when performing their day-to-day activities, they could
anyway perceive a pay increase as something they deserve or need. To this
extent two elements play a particularly remarkable role: the fairness of pay decisions
and the individual general financial circumstances.

Despite employers may be happy with their financial reward
package and their daily activities, these could feel to be treated unfairly by
their employer whether this should grant unjustified and unsustainable pay
increases to some individuals. The knock-on effect produced by such
circumstance can be extremely detrimental for the business and risks seriously
and irreversibly jeopardising the relationship of trust established between the
employer and its employees.

Internal fairness clearly represents a critical factor, but the
external labour market and the pressure coming from it have to be duly taken
into consideration, too.

It is important to clearly communicate and explain employees
the worth of their overall reward package composition taking also into
consideration, for instance, benefits and deferred benefits. Some employers may
offer more generous pay, whereas offering very poor benefits and pension
contributions. It is crucially important that these aspects are constantly and
clearly communicated to staff and to external candidates when offering a job.

Financial rewards are also
destined to invariably represent a reason for individual concern as long as
these have not reached somewhat of a financial comfort zone. As long as
individuals will be struggling to pay their monthly bills (utilities, mortgage
instalments, children school fees, public transport season tickets, etc.) it is
hardly imaginable that these may ever pay lip service to the importance of
their financial reward package. This circumstance can at times also give rise
to undesirable family tensions, which can in turn unconsciously affect employee
performance and behaviour at work.

Despite money may not act as a powerful motivator, its
hygiene effect definitely still counts and has to be properly and constantly
taken into consideration by employers and reward managers.

Considering financial and non-financial rewards separately,
it could be concluded that financial rewards would be the winners of the
attraction contest, whereas non-financial rewards would be the winners of the
retention tournament. However, both of them clearly play a significant role in
both competitions. The synergetic, multiplicative effect produced by financial
and non-financial rewards used in combination can effectually enable employers
to attain in practice their intended objectives, namely to attract and retain
quality individuals. Total rewards approaches are key in this sense. This does
not clearly mean that attracting and retaining quality individuals is a
straightforward task. People wants and preferences are subject to change over
time. Yet, many other employers strive to recruit high-flyers and quality
individuals.

Using fairness, consistency
and integrity definitely is of paramount importance, but genuinely considering
and taking heed of the employees’ wants and expectations assumes a greater
significance, too. First and foremost, employers need to know their employees
and their needs; this clearly represents the starting point, but whether
neglected any employer action and initiative risk proving to be a massive waste
of energies and resources. It would be like filling stores shelves with
products that the manufacturers considers outstanding, but which customers do
not like so that these remains and are destined to remain unsold in the
shelves.